Parramatta’s office stock soars amid hot demand
The western Sydney hub of Parramatta is on track to hit 1 million square metres of office space by 2022 as major tenants look for new space that could drive construction of new towers.
The federal and state governments are driving demand for new buildings, but the sheer scale of Parramatta’s expansion could see some projects eventually struggle to get off the ground.
In a major boost for the area, the Berejiklian government has issued a brief seeking about 43,800sq m of A-Grade office space in Parramatta’s commercial core for an initial term of 10 years. The move will suit a number of developers including tycoon Lang Walker and listed groups Dexus, GPT, Scentre, Mirvac and Charter Hall, as well private players.
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The brief effectively demands a new tower to host up to 4000 workers from end-2021 to end-2024. It requires top environmental credentials and large floor plates of more than 1500sq m.
The ATO is also coming to market with a brief for 50,000-60,000sqm. Around 28,000sqm of this could be workers coming out of the landmark Jessie Street Centre in Parramatta. This pre-commitment activity, along with existing projects, are forecast to increase Parramatta’s stock from 742,000sqm to over 1 million square metres over the next four years, JLL head of leasing, Australia, Tim O’Connor, says.
He says a run of major projects will add around 40%to Parramatta’s total stock.
He cites the Walker projects at 4 Parramatta Square and 3 Parramatta Square that will add about 106,000sqm and GPT’s new 26,500sqm tower in Smith St.
The difference between prime gross face rents between Sydney and Parramatta are the widest on record, which is drawing tenants to the western hub.
JLL put Sydney CBD average gross face rent at $1291/sq m and Parramatta’s at just $598/sq m. O’Connor says Parramatta is an attractive alternative for larger organisations looking to split their operations. Private companies, including the National Australia Bank, have also flagged precommitments.
The surge of new development has prompted concern the market will have difficulty absorbing so much new supply. Just over 30,000sqm of space is available now in Parramatta but this will rise as more towers are completed.
By next year more than 72,000sqm could be available with space to be filled in the new GPT tower, its existing building in Station St, as well as in Parramatta Square.
Looking beyond 2020, vacancy also looms in the Dexus towers at 150 and 101 George St.
This will spur a race for tenants among groups that have proposed new towers including Dexus, a consortium between the Coombes and Drivas groups, and Mirvac Group. Plans by Australian Unity for a major tower in Valentine Avenue and Dyldam’s scheme for the Parramatta Mall could also come under pressure.
This article originally appeared on www.theaustralian.com.au/property.